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28 March 2011

Breweries & the Beer Market

Extract from Executive Summary

The beer market is one made up of two clear sectors — lager and dark beer. Lager is a bottom-fermented beer and easily the most popular type of beer in the UK. Dark beer is also bottom-fermented and is commonly called ale, stout or bitter.

The lager industry is dominated by a small number of major multinational brewing companies, many of which have global reach. Over the past decade a number of new lager brands have been introduced by the multinationals which have had a varied reception. Brands that succeeded in the UK have helped the UK lager market to stay afloat during the recent global economic crisis, with market value falling by a rather subdued 2.8% since 2006. However, the dark beer sector has suffered slightly more, after dropping by 12.2% (in value terms) since 2006. Despite this, the dark beer sector is forecast to enjoy healthy growth of 9.6% from 2011 to 2015. This is due to the period of growth that national brewing companies, such as Greene King and Marston’s, have recently been enjoying. In addition, smaller, more local breweries have started to prosper due to the tax-break benefits afforded to such businesses.

The beer market has been the subject of much negative attention recently, with many worried about the increasing number of young people partaking in ‘binge drinking’. Reports of large-scale pub closures have certainly not helped, although sales of beer have remained relatively steady throughout the economic downturn, principally due to a good performance by the off-trade (sales in shops). This is mainly down to the cheaper prices offered on alcohol by off-licences and supermarkets, with many preferring to drink at home instead of in a pub or bar. Beer sold in supermarkets can be up to four times cheaper than identical products sold in bars or restaurants.

On top of pub closures, the industry is facing other problems, such as rising taxes and changes in the general attitude towards alcohol, particularly in relation to concerns over binge drinking and the effects on health that this can lead to. The taxes on beer in the UK are already among some of the highest in Europe, with further tax increases likely in the coming years.

On the whole, the beer industry has relatively limited prospects. Beer is always going to be in direct competition with wine, spirits and cider, as well as healthier soft drinks. The best that the industry can hope for is a modest yearly growth, as there is very little chance that the industry will see huge expansion in terms of consumer penetration and market value in the foreseeable future.

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